Council Regulation (EC) No 1911/2006 of 19 December 2006 imposing a definitive anti-dumping duty on imports of solutions of urea and ammonium nitrate originating in Algeria, Belarus, Russia and Ukraine following an expiry review pursuant to Article 11(2) of Regulation (EC) No 384/96

• (133) Regarding the likely evolution of exports to the Community market, it should be noted that imports of UAN into the USA market originating in Belarus, Russia and Ukraine were subject to anti-dumping measures until their repeal in April 2003. The table below shows the export development of these three countries to the USA market as of 2003:

[^E0008]: (¹)The figures include the first three months of 2003, i.e. the period within which the measures were still in place.

[^E0009]: (²)The RIP is considered for the sake of comparison with the overall analysis.

• (134) On this basis, it is shown that these countries increased significantly their exported volume from 2003 to 2004. In the case of Russia, in particular, the export volume rose from 180 000 tonnes in 2003 to about 600 000 tonnes in 2004, representing a more than threefold increase. The above trade statistics also show that the sharp and sudden increase in export volumes from these countries to the USA came to a halt during the RIP, where the increase in comparison to 2004 was less profound (11 %). The stabilisation of their collective exports volumes to the USA market to around 1 million tonnes was confirmed by these countries’ post-RIP export performance to the USA.

• (135) In the final report of the USA anti-dumping investigation on UAN imports from Belarus, Russia and Ukraine, the reason for this stabilisation is described in detail ([^E0010]). In this report, it is specifically stated that the high ratio of inland transportation costs means that the market for imports is virtually limited to the coastal areas and that these costs make final sales of imported UAN to many areas of the USA, including the important UAN consumption States in the so-called ‘farm belt’ area, far too expensive as compared to locally produced UAN. In other words, there is a limit on the size of the USA market with regard to imports, and the most significant areas in terms of consumption remain shielded from imports due to their location. In view of the observed stabilisation of imports from Belarus, Russia and Ukraine, as described in recital 134 above, it is therefore concluded that the USA market cannot absorb import volumes significantly higher than those registered in the RIP.

• (136) In the above context, and in view of the relative proximity of the Community market, it can be concluded that significant sales or spare capacity in the countries concerned, will be very likely directed toward the Community market, should the measures be allowed to lapse. Given the lower level of transport costs as compared to exports to the USA market, their export prices can be substantially lower than those prevailing in the USA market. Furthermore, as shown in recitals 50, 54 and 63, it was found that the sales of the cooperating exporting producers on the USA market were made at prices lower than the respective normal values.

Impact of spare capacities

Algeria

• (137) It is recalled that the domestic market of the product concerned in Algeria is insignificant and that virtually all production capacity is export oriented. Furthermore, the investigation showed that the current spare capacity of the Algerian producers represent 10 % to 20 % of the consumption on the Community market The total current spare capacity is estimated to be around 300 000 to 350 000 tonnes.

• (138) In particular in view of the proximity of the Community market, it is very likely that, if the measures were allowed to lapse, this spare production capacity would be used for production of the product concerned for export to the Community (Algeria only has 4,8 % market share). The expected high volumes would likely be at dumped prices and likely cause injury to the Community producers.

Belarus

• (139) It was found that there is a rapidly growing domestic market, on which the sole producer sold two thirds of its production during the RIP. Moreover, there were no exports to the Community in 2004 and the RIP and the exports to USA market have decreased despite the absence of anti-dumping measures and favourable market conditions.

• (140) If the measures were allowed to lapse, the situation with regard to Belarus would most likely change dramatically. In view of the fact that the domestic price was less than half of the prevailing market price in the Community during the RIP, a rational economic decision would lead the Belarusian producer to redirect significant quantities currently sold on the domestic market to the Community market at dumped prices. A recurrence of injury caused by high volumes of low prices imports from Belarus would likely be the result.

Russia

• (141) The Russian domestic market is relatively small as compared to the spare capacity which, as already mentioned in recital 66, amounts to 600 000 to 700 000 tonnes and which may be substantially increased if the capacities of the non-cooperators or capacities utilised currently in producing and exporting urea and ammonium nitrate, the two other nitrogen fertilisers, are added.

• (142) In this respect, it is also worth noting that there are currently trade defence measures imposed by the Community on imports of upstream products, namely solid urea and ammonium nitrate, from Russia ([^E0011]). Regarding the measures on urea, an expiry review investigation is currently being carried out ([^E0012]). Moreover, an interim review investigation limited to one major Russian exporting producer is currently being carried out with regard to the measures on ammonium nitrate ([^E0013]). Therefore, depending on the final outcome of these review investigations, there is a risk of shifting of production from those products to UAN, which could then result in an additional substantial increase of the estimated spare capacity of the Russian producers.

• (143) In view of the above there is a strong likelihood that exports to the Community will resume if measures were allowed to lapse. The volumes of such imports can conservatively be estimated to represent close to 20 % of the Community market, considering the consumption on that market (see recital 86) and the actual spare capacities in Russia. In view of the extremely low gas prices being paid by the Russian producers and the consequent pricing advantage for the product concerned, such imports would likely cause severe injury to the Community industry.

Ukraine

• (144) Among the countries concerned, Ukraine is at this moment the country with the largest spare capacity which is estimated in the range of 700 000 to 800 000 tonnes. The current spare capacity alone accounts for around 20 % of the Community consumption.

• (145) In the absence of a significant domestic market and in view of the proximity of the Community market, it is likely that, should the measures lapse, massive exports will be directed to the Community market. These exports will as shown above probably be at dumped levels and thereby cause major injury to the Community industry.

Conclusion on likelihood of recurrence of injury

• (146) In view of the artificially low prices the producers in the countries concerned pay for the basic raw material gas, and the impact this has on the production cost of UAN, it is likely that, if the measures were allowed to lapse, the producers in the countries concerned will have the possibility to export the product concerned at lower prices than the Community industry's production cost.

• (147) All countries concerned but Belarus have a surplus capacity which could be turned towards the Community market, should the measures lapse. As concerns Belarus, given the high sales volumes on the domestic market at much lower prices than those prevailing on the Community market during the RIP, it is very likely that at least part of them would be redirected to the Community market, should the measures lapse. The lower transport costs for sales to the Community as compared to the USA could also stimulate a redirection of sales to the Community market. In addition, for all four countries a redirection of part of their current exports from other countries to the Community is likely if the current measures were repealed as was demonstrated in recitals 132 to 136.

• (148) EFIA and certain exporting producers submitted that the assumption of shifting from urea and ammonium nitrate production to UAN ignores the basic economic fact that producers can not simply switch production without additional investments. Furthermore, they claimed that producers will not give up more profitable products just because anti-dumping measures on a less profitable product are removed.

• (149) With regard to the additional investments required, it should be noted that most of the major producing exporters of nitrogen fertilisers are integrated producers and therefore the decision on producing/exporting one or the other product depends mainly on the market conditions. As for the profitable products, the producers will indeed look for the most profitable products. In this respect, the anti-dumping measures play a major role in their decision, as this is demonstrated by the significant increase in dumped exports of UAN to the USA market during 2004 and the RIP, once the USA anti-dumping measures were repealed in 2003. Therefore, sound economic decisions made by the exporting producers will in all likelihood lead them to switch from one product to the other for maintaining or increasing their overall sales of nitrogen fertilisers and profits thereof. On this basis, the above arguments were rejected.

• (150) The above leads to the conclusion that should measures lapse, exports from the countries concerned would very likely occur in significant volumes and at prices that undercut the Community industry’s prices in view of their distorted and artificially low cost of production. This would in all likelihood have the effect of reinforcing the price-depressive trend on the market, with an expected negative impact on the economic situation of the Community industry. This would, in particular, impede the financial recovery that was achieved in 2004 and the RIP, leading to a likely recurrence of injury. In other words, the more the market conditions turn bearish, the sharper the price depression that can be expected from the countries concerned, account being taken of their significant difference in cost of production and their spare capacity.

COMMUNITY INTERESTIntroduction

• (151) According to Article 21 of the basic Regulation, it was examined whether maintenance of the existing anti-dumping measures would be against the interest of the Community as a whole. The determination of the Community interest was based on an appreciation of all the various interests involved.

• (152) It should be recalled that, in the original investigation, the adoption of measures was considered not to be against the interest of the Community. Furthermore, the fact that the present investigation is a review, thus analysing a situation in which anti-dumping measures have already been in place, allows the assessment of any undue negative impact on the parties concerned by the current anti-dumping measures.

• (153) On this basis, it was examined whether, despite the conclusions on the likelihood of recurrence of injurious dumping, compelling reasons existed which would lead to the conclusion that it is not in the Community interest to maintain measures in this particular case.

Interest of the Community industry

• (154) The Community industry has proven to be a structurally viable industry. This was confirmed by the positive development of its economic situation observed after the imposition of anti-dumping measures in 2000. In particular, the Community industry improved its profit situation between 2002 and the RIP.

• (155) It can reasonably be expected that the Community industry will continue to benefit from the measures currently imposed and further recover by reversing the downward trend in market share and improving further its profitability. Should the measures not be maintained, it is likely that increased imports at dumped prices from the countries concerned will occur thereby causing injury to the Community industry by exerting a downward pressure on the sales prices which will endanger its currently positive but still fragile financial situation.

Interest of importers

• (156) As mentioned in recital 10, only one importer indicated its willingness to be included in the sample and provided the basic information required in the sampling form. However, after sending the full questionnaire to the said importer, it informed the Commission that it did not wish to further cooperate with the investigation.

• (157) It is recalled that in the original investigation it was found that the impact of the imposition of measures would not be significant to the extent that the imports would continue to take place albeit at non-injurious prices and that as a rule, importers do not only deal in UAN but also, to a significant extent, in other fertilisers. Regarding the presumption that imports would continue to take place, this was only confirmed by imports from Algeria where an undertaking is in place for one exporting producer. This leads to the conclusion that some importers may indeed have had negative consequences from the imposition of measures, as indicated in recital 66 of Commission Regulation (EC) No 617/2000 ([^E0014]). However, the investigation did not show that some of the importers completely ceased their activities, but rather appeared to have focused on different fertilisers as projected. Thus, the imposition of measures appears to have had an overall limited impact on the majority of importers/traders.

• (158) In the absence of cooperation from importers, there is no reliable information available indicating that the maintenance of the measures will have a significant negative effect on importers or traders.

• (159) EFIA submitted that the non-cooperation of importers should not be considered as a lack of interest from their side but as a reflection of the unfair situation given the significant resources required by an anti-dumping investigation as opposed to their limited resources due to their small or medium size enterprises. Furthermore, they claimed that the investigation ignored the cumulative effect of the numerous anti-dumping measures on fertilisers on importers, and thus failed to apply a fair analysis of the effects on importers and farmers.

• (160) In this respect, it should be noted that for importers dealing with a wide range of fertilisers, UAN being one of them, there is the possibility of supplying with the different nitrogen fertilisers from other sources not presently subject to anti-dumping measures. On this basis, it was concluded that any negative impact from the continuation of measures on importers would not be a compelling reason against the continuation of measures.

Interest of users

• (161) Users of UAN are farmers in the Community. Demand for nitrogen fertilisers appears to be relatively inelastic and farmers tend to buy from the cheapest source. In examining the possible effect of the imposition of measures on users, it was concluded in the original investigation that given the small incidence of the cost of UAN on the farmers, any increase in these costs was unlikely to have a significant adverse effect on them. The fact that no users or user association provided any information contradicting the above finding in the framework of the current review investigation seems to confirm that: (i) UAN represents a very small part of total production costs for these farmers; (ii) the measures currently in force did not have any substantial negative effect on their economic situation; and (iii) the continuation of measures would not adversely affect the financial interests of the users.

Conclusion on Community interest

• (162) Given the above, it is concluded that there are no compelling reasons against the maintenance of the current anti-dumping measures.

ANTI-DUMPING MEASURES

• (163) All parties were informed of the essential facts and considerations on the basis of which it is intended to recommend that the existing measures be maintained. They were also granted a period to make representations subsequent to this disclosure.

• (164) It follows from the above that, as provided for by Article 11(2) of the basic Regulation, the anti-dumping measures applicable to imports of UAN, originating in Algeria, Belarus, Russia and Ukraine should be maintained. It is recalled that these measures consist of specific duties, with the exception of the imports of the product concerned which are manufactured and sold for export to the Community by one Algerian company from which an undertaking has been accepted,

HAS ADOPTED THIS REGULATION:

Article 1

Article 2

Article 2a

• —they are manufactured, shipped and invoiced directly by the said producer to the first independent customer in the Community, and

• —such imports are accompanied by an undertaking invoice which is a commercial invoice containing at least the elements and the declaration stipulated in Annex of this Regulation, and

• —the goods declared and presented to customs correspond precisely to the description on the undertaking invoice.

• —whenever it is established, in respect of imports described in paragraph 1, that one or more of the conditions listed in that paragraph are not fulfilled, or

• —when the Commission withdraws its acceptance of the undertaking pursuant to Article 8(9) of the basic Regulation in a Regulation or Decision which refers to particular transactions and declares the relevant undertaking invoices as invalid.

Article 3

This Regulation shall enter into force on the day following its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

ANNEX

Elements to be indicated in the undertaking invoice referred to in Article 2(2) and Article 2a:

• 1.The TARIC additional code under which the goods on the invoice may be customs cleared at Community borders (as specified in the appropriate Regulation or Decision).

• 2.The exact description of the goods, including: —CN code, —the nitrogen (N) content of the product (in percentages), —quantity (to be given in tonnes).

• 3.The description of the terms of the sale, including: —price per tonne, —the applicable payment terms, —the applicable delivery terms, —total discounts and rebates.

• 4.The name of the unrelated importer to which the invoice is issued directly by the company.

• 5.The name of the official of the company that has issued the undertaking invoice and the following signed declaration: ‘I, the undersigned, certify that the sale for direct export to the European Community of the goods covered by this invoice is being made within the scope and under the terms of the undertaking offered by [company], and accepted by the European Commission through Regulation (EC) No 617/2000 or Decision 2008/649/EC (as appropriate). I declare that the information provided in this invoice is complete and correct.’.

[^E0001]: OJ L 56, 6.3.1996, p. 1. Regulation as last amended by Regulation (EC) No 2117/2005 (OJ L 340, 23.12.2005, p. 17).

[^E0002]: OJ L 238, 22.9.2000, p. 15. Regulation as amended by Regulation (EC) No 1675/2003 (OJ L 238, 25.9.2003, p. 4).

[^E0003]: OJ C 312, 17.12.2004, p. 5.

[^E0004]: OJ C 233, 22.9.2005, p. 14.

[^E0005]: Regulation (EC) No 2117/2005, Article 2.

[^E0007]: Source: ‘Global fertilisers and raw materials supply and supply/demand balances: 2005-2009’, A05/71b, June 2005, International Fertiliser Industry Association.

[^E0010]: ‘Urea Ammonium Nitrate Solutions from Belarus, Russia, and Ukraine — Investigations Nos. 731-TA-1006, 1008 and 1009 (Final), Publication 3591’, April 2003, US International Trade Commission, p. 25, V-4, V-5.

[^E0011]: Urea: Regulation (EC) No 901/2001 (OJ L 127, 8.5.2001, p. 11). Ammonium nitrate: Regulation (EC) No 658/2002 (OJ L 102, 18.4.2002, p. 1), as last amended by Regulation (EC) No 945/2005 (OJ L 160, 23.6.2005, p. 1).

[^E0012]: OJ C 105, 4.5.2006, p. 12.

[^E0013]: OJ C 300, 30.11.2005, p. 8.

[^E0014]: OJ L 75, 24.3.2000, p. 3.

[^E0015]: OJ L 253, 11.10.1993, p. 40.

[^E0016]: OJ L 213, 8.8.2008, p. 39.